The S&P 500 gained 0.8 percent to 1,325.97 at 11:26 a.m. in New York. The Dow Jones Industrial Average rose 112.92 points, or 0.9 percent, to 12,609.30. Trading in S&P 500 companies was down 20 percent from the 30-day average at this time of day.

“The worse the numbers are in the U.S., the greater the pressure the Federal Reserve will have to increase their monetization plan,” Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees about $115 billion of assets, said in a telephone interview. “There’s a modest amount of optimism that the Greek vote will bode well for the markets. Investors are sitting on their hands waiting for Sunday’s vote.”

Speculation grew that the Fed will discuss stimulus efforts at its meeting next week after reports showed jobless claims unexpectedly climbed by 6,000 to 386,000 last week and the cost of living fell by the most in more than three years.

Consumer Prices

The Labor Department reported today that the consumer price index fell 0.3 percent, more than forecast and the biggest drop since December 2008, after no change the prior month. Economists projected a 0.2 percent decrease, according to the median estimate in a Bloomberg News survey.

The S&P 500 tumbled as much a 9.9 percent from a four-year high in April through June 1 amid lower-than-forecast economic data and concern Europe’s debt crisis was spreading. The index has rebounded 3.8 percent since. The Fed bought $2.3 trillion of bonds in two rounds of so-called quantitative easing from 2008 through 2011 to stimulate growth through lower borrowing costs. The central bank meets June 19-20.

The S&P 500 fell yesterday as borrowing costs rose in Italy and Germany before elections in Greece amid concern that the Mediterranean nation will leave the euro area. Greeks head to the polls on June 17 after an inconclusive May 6 election that catapulted into second place a party opposed to budget-austerity accords tied to 240 billion euros ($301 billion) in international aid pledges received since May 2010.

Home Depot

Home Depot, the largest U.S. home-improvement retailer, climbed 1.8 percent to $51.87 and McDonald’s, the world’s largest restaurant chain, advanced 1.4 percent to $89.23, as all 10 groups in the S&P 500 rose. Exxon Mobil increased 0.9 percent to $81.38 as energy shares jumped 1.2 percent.

International Game Technology rallied 10 percent, the most in the S&P 500, to $14.60. The maker of casino machines authorized a share buyback plan of as much as $1 billion in an effort to reward investors after a 23 percent stock drop this year.

Kroger Co. (KR) climbed 4.2 percent to $22.18. The largest U.S. grocery-store chain said profit for the year ending Jan. 31 will be as much as $2.40 a share, up from a prior forecast of as much as $2.38. Kroger also said its board approved a new $1 billion share buyback program, replacing an authorization that was exhausted on June 12.

US Airways Group Inc. (LCC) rose 2.8 percent to $12.31 after the carrier said in a slide presentation on its website that it sees a “very strong” second quarter and full year.

Edwards Lifesciences Corp. (EW) rose 7.3 percent to $97.18. The company won the backing of U.S. advisers for an expanded use of the its Sapien heart valve as an alternative to open-heart surgery.

NEW YORK, June 14 (Reuters) - 3M Co is seeing steady growth in its commercial graphics business that puts images on the sides of trucks and on storefronts, and which acts as an economic indicator, 3M's finance chief said on Thursday.

"That is a business that tends to see early signs of either an upturn or an inflection down," Chief Financial Officer David Meline told a Deutsche Bank industrial conference in Chicago.

"We do continue to see steady growth with those businesses right now. We're watching them very carefully because we, too, see what's in the headlines ... but I can't say right now that we've seen any changes that are significant."

June is an important month for 3M, Meline added, so it is too soon to tell how the quarter will finish.

The commercial graphics business accounts for about a fifth of sales in 3M's display and graphics segment, which itself is one of 3M's smaller divisions.

U.S.-listed industrial stocks are down some 9 percent from their March highs, lagging the wider market, amid concerns Europe's debt crisis is dragging down even those countries that have so far seemed insulated, such as Germany. That, in turn, has raised fears of a potential United States recession.

"While the U.S. still seems like the best game in town, it's impossible to ignore the potential impact a slumping Europe may have on the already slow-going recovery," industrial analyst Jeff Sprague of Vertical Research Partners said in a note to clients.

Most traders and investors have been hesitant to make big commitments ahead of Greece's elections on Sunday, which could lead to the debt-ridden nation's exit from the euro zone.

“It’s options expiration week, but you’d be a fool to be long this market—even the Greeks are pulling their money out of the bank,” said Todd Schoenberger, managing principal at The BlackBay Group. “Then you have the Fed meeting next weke and if the market doesn’t hear what it wants to hear, we’re going south and it’s going to be one of those shock-and-awe trading weeks…it’s going get really ugly.”

But some strategists explained the market has bee overly pessimistic and now is a good time for investors to be "fully invested."

“I’d be long going into the weekend because you’re able to get equities at historical lows and there will be two drivers to the upside for the market—fundamentals have been strong and there’s been a dramatic reduction in global risk,” said Doug Cote, chief market strategist at ING Investment Management. “Both of those together will work in concert to create a market melt-up.”

On the economic front, weekly jobless claims unexpectedly rose 6,000to a seasonally adjusted 386,000 last week, according to the Labor Department, in an ongoing sign of weakness in the employment market. Economists polled by Reuters had forecast claims dipping to 375,000 last week.

Meanwhile, consumer prices dipped 0.3 percent in May, falling the most in over three years, according to the Labor Department. And the current account deficit widened more than expected to $137.3 billion in the first quarter, the largest gap since the end of 2008. Economists had expected the gap to widen to $132.3 billion, according to a Reuters poll.

The round of downgrades put pressure on Spanish bond yields as investorssought greater reassurance to hold government debt. The yield on Spain’s 10- year government bond hit 7 percent for the first time following the downgrade.

Italian bond yields also came under pressure, pushing the country's three-year borrowing cost to above 5.30 percent in an auction. Traders have been speculating that Italy may be the next shoe to drop.

Also on the M&A front, Quest [QSFTLoading...()] jumped after the software manufacturer said a potential bidder proposed to buy the company for about $2.15 billion, outbidding an earlier offer of nearly $2 billion by a private investment firm.

U.S. stocks advanced Thursday, amid growing speculation and hope that the Federal Reserve may soon pull the trigger on more economic in light of a weakening job market.

Calls for the Fed to take more simulative stems have been growing for several months.

Hopes are that the central bank will either launch a third round of bond purchases, known as quantitative easing or QE3, or extend its current policy of Operation Twist, which is set to expire at the end of June.

"I think QE3 is becoming a greater possibility as we march into summer," said Dave Hinnenkamp, CEO at KDV Wealth Management. "The jobs picture has really been dimming as of late."

On Thursday, the Labor Department reported filings for initial unemployment benefits rose yet again. And the government's monthly jobs report, released two weeks ago, showed a slowdown in hiring.

The Dow Jones industrial average rose 94 points, or 0.8%, the S&P 500 gained 9 points, or 0.7%, and the Nasdaq gained 14 points, or 0.5%.

The Fed holds a two-day monetary policy meeting next week, with Fed Chief Ben Bernanke scheduled to hold a press conference at the conclusion of the meeting Wednesday afternoon.

Meanwhile, concerns remain heightened about Spain, after the yield on 10-year Spanish bonds peaked at 7.02% -- the highest level since the euro was introduced in 1999. The same level signaled the need for bailouts in other European countries earlier in the crisis, but Spanish yields slid to 6.97% later Wednesday morning.

The spike in borrowing costs dame a day after rating agencies Moody's and Egan-Jones both downgraded Spain, citing bleak economic prospects and the country's high debt load.

Spain recently requested up to €100 billion from the European Union to recapitalize its ailing banks. But with the higher borrowing costs, investors are worried the country will need even more help.

"Unless the Europeans come up with a policy response soon, it's looking increasingly like Spain will need a (government) bailout on top of support for the banks," said Nick Stamenkovic, fixed income strategist at RIA Capital Markets in Edinburgh. He estimated the government could need €50 billion.

Investors are also increasingly worried about a worsening situation in Italy, which is an even larger economy. It was able to sell €3 billion of its 3-year bonds, and an additional €1.5 billion of the 10- and 15-year debt at an auction Thursday. But it had to pay significantly more than at its previous auction, with the yield on the 3-year bonds rising to 5.3% from 3.9% in May.

"Italy is clearly being caught up the contagion that is affecting Spain," Stamenkovic said. "But there's a bit of relief that they did their targets. Yields are off their earlier highs."

U.S. stocks ended lower Wednesday amid ongoing concerns about Spain and the European debt crisis.

Economy: The Labor Department reported that retail prices fell 0.3% in May compared to April levels, driven down by the falling gas prices. It was the first drop in the Consumer Price Index in two years, and a slightly bigger drop than forecast.

Companies: Shares of cell phone maker Nokia dropped after the Finnish company announced it was cutting 10,000 jobs worldwide, and warned that competition in the smart phone business would hit results somewhat more than expected in the second quarter.

Shares of meat producer Smithfield Foods slipped after the company reported a bigger-than-forecast drop in earnings.

Shares of grocery chain Kroger rise after it reported a better than expected increase in earnings and a $1 billion share buyback program.

World markets: European stocks slid in afternoon trading. Britain's FTSE 100 shed 0.7%, the DAX in Germany lost 0.6% and France's CAC 40 fell about 0.3%.

Asian markets ended in the red. The Shanghai Composite fell almost 1%, while the Hang Seng in Hong Kong dropped 1.2% and Japan's Nikkei shed 0.2%.

Currencies and commodities: The dollar fell against the euro, the British pound and the Japanese yen.

Oil prices edged lower as members of the OPEC nations gather in Vienna to discuss oil production levels. Crude for July delivery fell 7 cents to $82.56.

Gold futures for August delivery edged up $6.00 to $1,625.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 1.62% from 1.60% late Wednesday.

Jun 14 (Reuters) - Canada's main stock index looked set to open lower on Thursday as a three-notch downgrade on the Spanish debt ahead of Greek elections this weekend and rising Italian and Spanish borrowing costs weighed on sentiment in equity markets.

* Italy's three-year borrowing costs spiked to 5.3 percent at an auction on Thursday, underlining the mounting pressures on the euro zone's third-largest economy after a Spanish aid deal failed to convince investors the bloc's crisis can be contained.

* Credit ratings agency Moody's Investors Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3 from A3, saying the newly approved euro zone plan to help Spain's banks will increase the country's debt burden.

* Nokia plans to cut one in five jobs at its global cellphone business as it loses market share to rivals Apple and Samsung and burns through cash, raising new fears over its future. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ To receive an early e-mail of Reuters Morning News Call - Canada -- a preview of market moving news -- Thomson Reuters subscribers can register at ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

MARKET SNAPSHOT

* Canada stock futures <0#SXF:> traded down 0.09 percent

* U.S. stock futures <0#SP:>, <0#DJ:>, <0#ND:> were mixed in the range of -0.1 percent to 0.14 percent

* European shares, were down

COMMODITY PRICE MOVES

* Thomson Reuters-Jeffries CRB Index : 269.16; was down 0.05 percent

* Gold Futures : $1620; rose 0.12 percent

* US Crude : $82.55; fell 0.08 percent

* Brent Crude : $96.44; fell 0.71 percent

* LME 3-month Copper : $7376.25; fell -0.19 percent

CANADIAN STOCKS TO WATCH

* CAE Inc. : The aviation trainer said it sold four flight simulators to Aviation Industry Corp of China, Singapore Airlines and two other companies for C$65 million. CAE said it was awarded a series of military contracts valued at more than C$110 million.

* Evertz Technologies Ltd. : The broadcast equipment maker reported a 9 percent rise in quarterly profit on higher international sales. Its fourth-quarter earnings rose to 18 Canadian cents per share from 16 Canadian cents per share, a year earlier. Revenue rose 11 percent to C$76.3 million, while international region revenue rose 42 percent to C$39.6 million.

ANALYST RECOMMENDATIONS

Following is a summary of research actions on Canadian companies reported by Reuters.

In its semi-annual Financial System Review released today, the Bank of Canada (BoC) cited continued robustness of Canada’s financial system and relative stability in domestic credit markets despite the fragile global environment. However, the Bank warned of high dangers to the Canadian economy if the European sovereign debt crisis worsens, emphasizing that worsening conditions in the euro zone could cause “major shock” to Canada.

The sources of major risks to the stability of Canada’s financial system remain broadly the same as those reported in the December 2011 Review, as outlined below:

Further escalation of the euro-area sovereign debt crisis;

An economic slowdown in other advanced economies;

Financial stress in the Canadian household sector;

A disorderly resolution of global current account imbalances; and

Excessive risk-taking associated with a prolonged period of low interest rates.

Should the euro debt crisis continue to intensify, further weakening in global economic would fuel sovereign fiscal strains and heighten risk aversion. This would exacerbate pressures on bank balance sheets and ensuing tightening of lending conditions would further dampen global economic growth. Diminished growth prospects would foster expectations of continued low interest rates, possibly eroding the financial positions of life insurance companies and pension plans while boosting household borrowing in Canada.

The Bank stated that mitigation of risks to the global financial system requires a number of policy actions, with containment measures in the euro area at the forefront of priorities. Mitigation measures abroad include adequately capitalizing euro-area banks, reinforcing financial firewalls, enforcement of structural and product market reforms, and a clearer path for risk mutualization within the European monetary union. Globally, current account imbalances must be addressed to help foster sustainable and balanced global economic growth.

Domestically, “the high indebtedness of the household sector and elevated valuations in the housing market require continued vigilance”. In regards to broader financial reform, Canadian banks plan to implement Basel III capital rules as a key priority, which will help build a resilient market infrastructure in future.

The loonie remained largely unchanged against the greenback, as few developments have come out since the Bank’s December 2011 Review. At the time of this report, the USDCAD pair was trading at C$1.0246 to the dollar.